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Asia's Economy Shows Steady Growth - 2004-02-08

South Asia is beginning to see the benefits of economic reforms begun about a decade ago, according to economists.

A new study says South Asia has sustained an average growth rate of 5.5 percent for more than a decade.

The study was done by the New Delhi think tank Research and Information Systems. Ram Upendra Das, the research institute's senior economist, says that growth is helping raise incomes and reduce poverty in a region that holds more than 40 percent of the world's poor people.

"This region has emerged as one of the most dynamic growth regions in the world in recent times, and the growth prospects in future … are very optimistic," he said.

The South Asian region covers India, Nepal, Bangladesh, Pakistan, Sri Lanka Bhutan and the Maldives.

The World Bank says poverty has been cut rapidly in the past decade, since the protected economies of South Asia took steps to integrate with the global economy. In India, for example, five decades ago nearly half the population lived below the poverty line. That number is down to 25 percent.

But on a recent visit to India, the World Bank's chief economist, Francois Bourguignon, warned that South Asian countries need to accelerate and sustain high growth rates for many decades before poverty is eliminated.

"The distance to be covered before development will be reached is enormous and this process must last for many decades, and the problem is to anticipate future bottlenecks," said Mr. Bourguignon.

The World Bank wants South Asian countries to focus on faster reforms and lower tariffs to improve competitiveness and keep growth on track. Economists say the region must also improve its poor infrastructure to woo more foreign investors.

The study by Research and Information Systems says the service sector has emerged as the key driver of growth in the region, contributing nearly half of the increase.

The report says exports are growing at a robust rate of about 12 percent, but the region needs to move towards more high-technology manufacturing to boost the profile of its exports.

According to the study, India, the biggest country in the region, could emerge among the world's largest economies by 2050.

The report also urges South Asia to form deeper trade alliances, saying the region is at a disadvantage because it does not belong to any of the world's major trading blocs.